Economic Investment Incentives Available in Tanzania

Economic Investment Incentives Available in Tanzania

With an investment climate supported by a sound regulatory framework, improved infrastructure, high-quality telecommunications, and a reasonably professional workforce, the Tanzania’s economy is dynamic and offers substantial tax and other incentives that are designed to encourage investment projects.

INVESTMENT TAX INCENTIVES

Tanzania recognizes the importance of investment in stimulating economic growth and development in the country and creating a potential for sustainable future revenue generations. A number of tax incentives are granted to both local and foreign investors in a variety of sectors in order to encourage investment.

An Investment policy was put in place in 1990 when the Government enacted the National Investment Promotion and Protection Act (NIPPA 1990, which granted tax incentives to investors in the form of tax holidays for a specific period Of time. The NIPPA 1990 was repealed and replaced by the Tanzania Investment Act, 1997 that is now operational.

The Tanzania Investment Act (TIA) 1997, transferred all the tax incentives to Income Tax, 2004, East African Community Customs Management Act, 2004, Value Added Tax Act,1997 as revised in 2006. The main objective of this incentive was to make the tax structure more transparent and less complicated to taxpayers. Since then income tax holidays were abolished and tax incentives are now granted to investors in the form of enhanced Capital deductions and allowances.

Investment Laws abolished Income Tax holidays and tax incentives are now granted in the form of enhanced capital deductions and allowances, 100% capital expenditure to Mining & Agricultural sectors. The Income Tax Laws allow 50% Capital allowances in the first year of use for Plant and Machinery used in manufacturing processes and fixed in a factory, fish farming; or providing services to tourists and in a hotel. Indefinitely carry forward of losses against future profits.  However, companies with perpetual unrelieved Losses for 3 consecutive years are charged  0.3% of annual turnover.

Corporate Tax  30% and newly listed company to  DSE  with at least  30%  of its shares issued to the public for three consecutive years from the date of listing – 25%.

Withholding Tax on dividends (10%) and (10%) on loan interest,  on  Rental  Income  (10%). The  investors  who  are  in  lead  and  priority  sectors,  they  are  allowed  Import  Duty  and VAT  exemptions  on  their  Capital/  Deemed  Capital Goods; these sectors are; agriculture including livestock, Air Aviation, Commercial buildings, Commercial, development, and min micro finance Banks, export-oriented projects, Geographical   Special   development   areas,   Human resources development, manufacturing, Natural Resources including fisheries, timber and  beekeeping,  rehabilitation and expansion, tourism and tour operations, Radio and television broadcasting, Transportation (Cargo and marine) and Economic Infrastructure.

Import Duty and VAT exemption on Deemed Capital Goods. These include; building materials, utility vehicles, equipment etc. According to the  2013/14  budgetary changes,  the import  Duty exemption granted to Deemed  Capital  Goods is now  75%  whereby the investor shall pay  25%  of import  Duty due. While VAT Exemption on Deemed Capital Goods is 45% of VAT payable, whereby the investor shall pay 55% of the VAT payable.
Import duty (0%) on imported  4WDs  designed and built for tourist purposes, subject to satisfying criteria set by  East  African Community Secretariat. Import duty (0%)  on hotel equipment,  which was engraved,   printed or marked with hotel logo imported by a licensed hotel for its use.

 VAT Special Relief on Project Capital Goods (i.e. Capital Goods by Generic Description). These include plant, machinery,  forklifts,  crane,  boilers,  furnace, crushers,  graders,  caterpillars,  excavators,  bulldozers,  angle dozers,  lifts/  escalators etc..

VAT Exemption on pesticides, fertilizers, health supplies,  livestock, unprocessed agricultural products,  agricultural implements,  books and newspapers,  educational services, financial services, petroleum products,  air crafts,  air-crafts engines, air-crafts parts, computers, wind generators and liquid elevators,  photo-voltaic and solar thermal. Heat insulated milk cooling tanks and aluminum Jerry cans used for storage and collection of milk in the dairy industry.  Farm services of land preparation, cultivation,  planting, and harvesting.